Weekend Newsletter for July 4, 2004
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Read this report online in full color with graphs at
http://www.investmenthouse.com/weekend/070404.htm
1) MARKET SUMMARY
Jobs report fails to provide market a much needed catalyst.
– Weaker jobs data sends weakened market lower, but Friday selling was less intense.
– Jobs growth slows pace for a month causes some to erroneously call an end to the expansion.
– Summer rally on the ropes but there are more than just pockets of strength.
http://www.investmenthouse.com/1weekendmarketsummary.htm?123 “> Click here or on link for our full Weekend Market Summary
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2) Stock Splits
Playing stock splits can be very profitable, but it takes know-how.
Our stock split service focuses on three main types of plays:
1) pre-announcement (where we forecast an upcoming split prior to the company making the announcement); 2) pre-split (these plays are made in the days leading up to the actual split day); and 3) post-split plays (plays made after the actual stock split where the stock is showing continued or renewed strength).
We play pre-split plays as short-term plays. We get in when the technical indicators show us things look right, grab as much as we can, and get out, always being conscious of resistance and support. These stocks are highly volatile at this time, and can turn on you quickly. Don’t let good profits disappear. Watch for turns, especially when a stock trades in a wide range and finishes off its high. That is a sign these stocks often give you that they are running out of steam. We usually get out and ask questions later. We can always get back in. We like to play in the money calls, preferably two strike prices in the money as this usually gives us a greater delta (the percent an option will mover versus the stock’s movement). We prefer deltas of 75 or better. This means if the stock moves 1 point, the option should move three-fourths of that point. That means up or down.
Remember, wait to see the stock start to move up. Don’t just blindly make a play and don’t try to guess tops and bottoms. We can look at indicators to give us a clue as to what will happen, but we need the stock to confirm it for us. Here’s a pre-split play to watch and our current analysis.
SSP (E.W. Scripps–$106.32; -0.12; optionable): Newspaper publishing. Splits 2:1 on a date to be announced.
STATUS: 50 day EMA test. Up off the 50 day EMA (104.86) Thursday as the market sold and held on Friday, both sessions on very low volume. It will need a bit more volume as it continues the move to get us into positions. A very nice 50 day EMA test with volume still running higher ahead of price. Again, want to see some more volume on the move through the buy point.
Volume: 109.6K Avg Volume: 150.863K
BUY POINT: $106.62 Volume=177K Target=$112 Stop=$104.88
POSITION: SSP IA – Sept. $105c (59 delta).
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3) Technical Play
DAR (Darling Intl.–$4.24; +0.17; no options): Recycler of food processing by-products (grease traps and recycling).
STATUS: Test breakout. This is about as un-sexy as you can get, but you cannot argue with the pattern or the potential to move higher from here. It formed a 9 week double bottom and broke out the last two weeks of June. It rallied to 4.50 on the high and then moved back to test the breakout. Friday it sold below the 18 day EMA (4.03) but then reversed and rebounded to post a solid gain. Excellent low volume test and then volume reversal has set up the next move. Strong 3 to 0 accumulation (3 up price weeks on rising volume to 0 down price weeks on rising volume) shows money continuing to move into the stock during the base and greased the way for the breakout. Excellent money flow continues to surge up ahead of the price, and it looks as if DAR is going to slide right up and follow that price higher.
Volume: 1.266M Avg Volume: 385K
BUY POINT: $4.35 Volume=500K Target=$5.25 Stop=$4.05
POSITION: – Stock (no option chain).
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4) Covered Call Play
ANF – Abercrombie & Fitch Co. is currently trading at $37.58 The August $37.5 Calls (ANFHU) are trading at $1.90. That provides a return of about 5% if ANF is above $37.5 on expiration Friday in August.
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The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP., or Split Ventures, Ltd. This information is not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on the related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites.
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